President Barack Obama has made raising the federal minimum wage a key component of his domestic agenda moving forward as he contemplates the final three years of his presidency and the nation’s still-recovering economy. Ideally, the president would like to see the federal minimum hourly wage increased from the current $7.25 to $10.10 an hour, which would result in nearly a 40 percent increase in wages for low-income workers. Yet, the proposed federal minimum wage increase might result in other repercussions.
According to the Congressional Budget Office (CBO), which is considered a nonpartisan watchdog in regards to U.S. fiscal and economic policy, the president’s proposed federal minimum wage increase would help alleviate the plight of an estimated 16.5 million low-income workers. On the flip side, the hike could potentially cost the U.S. labor force 500,000 jobs.
The CBO’s report focused on two options in regards to the minimum wage hike. Option one involved raising the minimum wage to $10.10 an hour by July 1, 2016, over three phases. The initial phase would commence this summer with automatic increases in the future based on inflation. Option two involved raising the minimum wage to $9 an hour by July 1, 2016, over two phases. This plan would not commence until next year and would not rely on inflation. The $9 an hour hike proposal would likely have less of an effect on the labor force, only costing a potential 100,000 jobs. However, it would conceivably aid 7.5 million low-income workers. It should be noted that the potential job-lost statistics are subjective and many other factors should be considered when examining the pros and cons of higher wages. For example, with higher incomes, you often encounter higher productivity, lower rates of absenteeism, and higher retention rates. There is also significant debate among economists as to how the data should be interpreted and how the potential interplay of factors will ultimately affect the economy and labor force.
Unfortunately, the potential paradox of higher income and reduced poverty versus job loss has sparked intensified partisan debate. As midterm election prospects loom, the partisan politics inherent in such matters have once again found an opportunity to present their opposing agendas at the possible expense of the millions affected by this controversial policy point. Republicans continued to emphasize their long-held position that raising the minimum wage would result in fewer jobs, while Democrats focused on the benefits of elevating workers out of poverty and narrowing the gap regarding income inequality.
As Congress continues to drag its feet on the minimum wage issue, President Obama signed an executive order last week that boosted the minimum wage for employees of federal contractors to $10.10 an hour, and he remains determined to see the overall federal minimum wage increase meet that same expectation. President Obama’s message is clear. Congress can no longer utilize stall tactics when addressing the federal minimum wage increase as they have from the time the President initially introduced it during his first term. The executive order Obama signed last week was intended to call out Congress on its inaction, as well as aid workers employed by federal contractors.
Whichever proposal is employed, the labor force and American people will be impacted. There are several questions raised that need answered. Are the benefits of the federal minimum wage increase worth the cost? Can leaders on both sides stop playing party politics long enough to aid their constituents? How can such economic inequality exist in a nation as rich as the United States? Why should full-time workers have to worry about putting food on the table and often rely on some form of public assistance in order to make ends meet? As President Obama has stated on many occasions, “Americans who work full-time should never have to live in poverty.”
By Leigh Haugh